Top 4 HR Outsourcing Best Practices for SMBs

Connect with Author

Chiradeep is a content marketing professional with 8 Years+ experience in corporate communications, marketing content, brand management, and advertising.

Over the course of his tenure, he’s worked on several big-ticket projects, led and trained a variety of teams, and been instrumental in driving delivery quality, timeline adherence, and talent harvesting.

SMBs, today face immense external and internal pressures – from technological disruptions, and changing workforce dynamics, to compliance and regulatory challenges. Given this reality, SMBs are turning to HR outsourcing as a business strategy. Here are four HR outsourcing best practices that can help SMBs increase the real and perceived value of outsourcing.

For small and medium-sized businesses (SMBs), it’s important to focus on core strategic tasks and business outcomes. HR outsourcing lets SMBs shift critical areas such as payroll, benefits administration, training and recruitment to a professional HR firm, instead of maintaining an internal HR staff.

HR outsourcing is a growing trend, spread across diverse pathways for implementation. While HR outsourcing can help streamline processes and contain operational costs, there are certain challenges that can potentially derail your outsourcing initiative. Here are three HR outsourcing best practices that can help you achieve efficiency and drive business growth:

Process Documentation

Process documentation is crucial to helping outsourced HR staff members become familiar with current policies and procedure to perform activities such as payroll, performance management, exit formalities, etc. A process document that clearly details internal controls necessary to ensure HR outsourcing best practices and to appropriately separate duties and supervisory controls is key to smoother an outsourcing experience.

In the event that an outsider needs to step in and perform critical HR activities such as payroll, having a documented process is essential.

Partner with an HR consulting firm

A professional HR consulting firm is recommended when you are looking to outsource a specific task or assignment, or your entire HR function. Although there are individual HR consultants available, hiring them for more than a onetime project may not be a great idea. SMBs needs assistance with HR across a wide range of activities (strategic and managerial), so a firm with diverse staff and skills can handle the diversity of HR activities with ease. HR consulting firms also bring their technical expertise to the table which is an invaluable asset for SMBs looking to contain costs. Major HR consulting practices have sophisticated end-t-end HR tools at their disposal, enabling them to perform manual and repetitive tasks at scale.

“To assist in the final decision-making process, create a weighted scoring matrix. This will also help down the road when the selection team needs to explain why this particular vendor was selected. It never fails; someone will always challenge the selection decision. This scoring matrix should include key decision criteria, such as RFP scores, finalist meeting scores, references, pricing, and any key considerations unique to your organization,” recommends Tara Morey Senior HR Consultant at Findley, an 350-degree HR services company.

Leverage the power of HR software

For SMBs, this is probably the most preferred option given that it works as an end-to-end solution and is cost optimized. The HR software will have all the labor and compliance regulations and protocols built in and will also offer employee data management, from onboarding to benefits and payroll. Further, it will provide the tools to track all relevant employee screening and verification details and will store all the data in a cloud-based system, ensuring location and device-agnostic accessibility. Typically, it will also deliver some level of employee self-service through the Internet or a mobile app.

Measure the ROI of your HR outsourcing initiative

Any outsourcing strategy is based on specific objectives in mind. However, once the program is up and running, organizations often fail to determine whether the expected outcomes have actually been achieved. A recent Deloitte survey found that more than half the respondents reported lower than expected cost-savings.

Understanding the return on investment is crucial as organizations’ HR outsourcing strategies evolve. John Sullivan, Professor of Management at San Francisco State University, recommends using well-designed metrics to help calculate the ROI of outsourced services. Sullivan asserts that establishing clear metrics can help organizations:

Outline expectations from the get-go, focusing all stakeholders on important issues and key priorities.

Compare results for different time period, encouraging continuous improvement

Monitor internal customers’ satisfaction with the HR outsourcing program, promoting a culture of data-driven decision making in the organization.

Remember, what doesn’t get measured, doesn’t get managed.

A final word

The simplest way to go about an HR outsourcing plan is to step back and assess your needs. Consider your company’s long and short-term goals, evaluate budgetary constraints, and measure the role and impact of HR in the scheme of things. You can easily overcome the challenges and issues of HR outsourcing with these four HR outsourcing best practices.